That’s Predatory! How Payday Loans Strangle Working Families

By Dr. Alex Mikulich, Research Fellow

Roman Catholic social teaching on usury is clear: “those whose usurious and avaricious dealings lead to the hunger and death of their brethren in the human family indirectly commit homicide, which is imputable to them.” Usury, the church continues, “is still tragically widespread,” and is “a scourge that is a reality in our time that has a stranglehold on many peoples’ lives.” [1]

How does payday lending lead to a “stranglehold on many peoples’ lives”?

There are now over 20,000 payday loan shops in the U.S., more than McDonald’s, Wendy’s, and Burger King restaurants nationwide. Ads for “EZ” or “Quik” cash are deceptively attractive to someone in a financial bind. Payday loans are small, short-term loans that are secured
by a borrower’s personal check.

While households may need a loan occasionally to cover unexpected expenses, it is counterproductive for anyone to secure a loan that demands repayment in two weeks to a month at an annual percentage rate (APR) of 390 percent or more. Loans at a 36% APR or lower and that can be repaid over a longer period are a better option for cash-strapped families.

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